China's silicon-self-sufficiency plan likely to miss targets due to Factories Not Present error China's aim of satisfying 70 per cent of its own semiconductor with home-baked product by the year 2025 will fall well short of that target according to analyst outfit IC insights. China wants to make its own silicon because it realises it is exposed to trade disputes that can – as has come to pass with the USA’s ban on Huawei …
"Which gives the likes of Intel and Samsung ten years to figure out what happens once the China market disappears."
And roughly eleven years to figure out how to deal with Chinese competition in non-Chinese markets. Less than that really because semiconductor fabs are, I'm told, rather specialized, so China will presumably reach 100% plus domestic capacity in some types of semiconductor before the decade is out and will, one assumes, start selling their excess product into overseas markets.
"Of the $19.5 billion worth of ICs manufactured in China last year, China-headquartered companies produced only $7.6 billion (38.7%), accounting for only 6.1%"
I'd be interested to know why that is. Are their own chips too low quality? Too power intensive? Too expensive? Adoption barriers to high? Production output too slow? Even if the government were to offer subsidies, would be overall disadvantages still be too high?
"I'd be interested to know why that is."
A good point. I think the answer is somewhat obvious, but you have to take a step back and look at the big picture when it comes to China.
China still has a communist government that allows a small number of people to become VERY wealthy, while the masses work for slave wages. Even though I'd say there's been overall "improvement" over the years, there's not a whole lot of upward mobility. There's no real incentive to excel, unless you happen to have a VERY good "social score" or whatever it's called.
As such, the entrepreneurial mentality is being repressed, In My Bombastic Opinion.
However, foreign companies are 'FAB-ing' chips there. And when the foreign companies see policies change in response to some of the things *cough* that China has apparently done within the last few months, and start building more things "elsewhere", the supply chains won't have to be produced in China any more and it becomes more economical to build NEW chip-FAB sites much closer to those places that are "the future" for making i-things and so on. Like, maybe, Mexico. Or Vietnam. Or some country in Africa. Or Central America. There are several places in the world where they have the potential of being "investor friendly" and NOT engage in 'difficult to deal with' politically based policies, and STILL provide the inexpensive general labor needed for current processes.
There's also the possibility of building things in "lights out" factories. you can expect to see a LOT of that in the near future, I'd wager.
Given this, even if China does increase the amount of FAB activity within China, if their market of low-skilled labor dries up and/or goes elsewhere, those FAB factories won't be seeing a whole lot of need...
Anyway - we'll see over the next year, I bet, a good indicator of the future.
(FYI - a good part of what I do is indirectly related to manufacturing overseas, so I have some insight on this kind of thing, dealing with engineers and other aspects of overseas manufacturing on and off for the last 30 years)
" In contrast, Micron and SK Hynix each have well over 30,000 employees and Samsung’s memory division is estimated to have over 40,000. "
That's fools logic. They can scale up quite easily, this isn't a cottage industry here with individual weavers turning out individual carpets. More people is worse not better, it leads to inertia. The machines they need, can be second sourced in Germany and UK (and some in China), so the factory kit is replaceable. The software design tools they already have. None of that is irreplaceable.
As to whether they can do it in 4 1/2 years? That seems a trivial goal. They could do that in 1 year if you pushed them.
Look at the result of the tariffs. How many Chinese made items have had their manufacturing moved to the USA? ~none. Close to zero. You still cannot make the products in the USA, because they could not be exported at a competitive price to markets where US tariffs don't exist to skew the market in USA favor. I doubt they even have the technology needed at this point to make stuff, even if it was only for US markets.
It's not going to change either, USA trades at a loss and has since the 90s. It's propped up by money printing. Each dollar made is leveraged up, and given to the Mnuchins/DeVos's/Carlson's/Swanson's/Beal's. That inflates the GDP number. It's why housing is overpriced, stocks and other assets are overpriced, its simply billionaires are awash with free money and have nowhere productive to put it. So they pump up asset values for the rest of Americans.
The whole economy is locked into that. To borrow money to fund that increasing deficit, that GDP number needs to keep increasing, to keep increasing as the real economy underneath shrinks, they have to print more and more money. Productive workers cannot work for low wages, if their houses costs so much, and their pension plan is built on overpriced stocks, and their health insurance costs an insane amount. So wages can never be competitive.
Contrast that with the export tariffs. Soy, Maize, Wheat, Chinese markets poof gone. Farm exports easily replaced. Huawei simply re-sourced US chips and replaced Google store with their own.
Trump's Atlantic city projects. $700 million in junk bonds supported by $820 a day in profits. That's what it reminds me of. All bluster, smoke and mirrors.
"Chips are made by machine not hand."
Yes, they are made by machines. But the IC toolsets are extraordinarily complex. And the machinery often requires reconfiguring between production runs. Lots of support troops. Not just a few folks hustling chip trays around clean rooms and slapping shipping labels on cartons of chips. Lots (hundreds) of engineers, mechanical specialists, etc,etc,etc. And the production lines seem to be in a constant state of flux.
I've never been closer to a semiconductor fab than the parking lot. But what I saw from the quite large parking lot was a VERY large factory with big chemical tanks, a railway siding, and lots of ancillary office buildings (plus more offices in trailers in the parking lot). I was particularly impressed with a row of about half a dozen detached-garage sized squirrel-cage blowers awaiting installation. A serious industrial facility -- comparable to airframe manufacturing facilities that I've worked in in the past.
I think that if you're going to manufacture a full range of complex semiconductors, you really are going to require massive facilities staffed by tens of thousands of highly skilled individuals.
>massive facilities staffed by tens of thousands of highly skilled individuals
One thing the Chinese have are tens of thousands of highly skilled individuals. Its difficult for us to get to grips with the scale of China, its so much larger than even the US that even its middle class is largert han the entire US population. (....and I daresay that most of the UK's population would get swallowed up in one urban area).
The reason why China hasn't been focused on chip manufacture is that until recently it was a fully vested partner in the global supply chain. It imported parts from foreigh companies and turned those parts into products that it exported. It was the way that the globalized economy was supposed to work. The US has always liked to maintain a strangle hold on certain technologies through its ITAR regulations but the Trump regime has rachedted up the stakes by weaponizing trade flows. This disruption of supply chains will slow things down a bit but it will eventually cause the supply chains to readjust, and when they do it will be to the detriment of the US. Nobody likes unreliable partners.
China has a huge holding of US treasury bills (bonds for non-US people) and is accepting more. This is not because they think that the US bills are good investments - it is instead to prop up the US until China is self sufficient. Anyone who looks at the US debt clock can see that the US is heading for a major crunch. (Unfunded liabilities of over $147 trillion, national debt of over $25 trillion, federal spending over $3 trillion more than federal income, number of manufacturing jobs halved since 2000 etc).
When the bubble finally bursts, there will be a lot of destitute people in the US who have no food, no hope but will have guns - the result will make the US Civil War look like a friendly party. The collapse will cause a worldwide financial crash that will make the great depression look like a minor blip.
China is trying for self sufficiency in the hope that it can survive the crash - if it does then it will become the dominant world power.
I disagree. China is holding so many treasury bills because they have nowhere else to put all those US dollars that the US is sending over to buy their goods.
The interest rate is so low that they can't just keep it as currency.
They don't want to convert it all to other currencies since in the end the US dollar is still the most stable.
They could put some in the US stock market but not all.
The only place to put the money to get some interest is in buying US treasury bonds. It's the path of least resistance.
I disagree. China is holding so many treasury bills because they have nowhere else to put all those US dollars that the US is sending over to buy their goods.
Nope, China is trying to get rid of US Dollar as soon as possible - buying gold for example (and not only China). Because of that, China is not the biggest USA creditor anymore, now it is Japan.
Clock is ticking...
Does China have their own x86(-64) compatible CPUs or are they planning on rolling their own architecture?
I know AMD was working with Chinese manufacturers to make a Gen 1 Zen-based clone a few years back before trade restrictions hit and AMD had to bail.
Edit: Apparently so, Zhaoxin (a joint venue between VIA and the Shanghai government) makes x86-64 CPUs, based on VIA processors.
I believe Zhaoxin Semiconductors is still making their x86 compatible CPUs. As its VIA who own the X86 license to product them and they are a Taiwanese company, I don't see how Trump can stop them with the US trade restrictions. Especially since as far as China is concerned Taiwan is part of the PRC.
China's respect for Intellectual Property laws tends to be a bit "flexible", so I imagine they might make x86 chips for domestic consumption. Probably there will be implementation details that differ and some attempt at "clean-room" implementation so that generations of lawyers can argue over whether or not the Chinese versions are legal. Traditionally Intel has sued everyone who challenges their monopolies. But I'm not sure that taking on the world's largest or second largest economy in its own courts is going to look like a brilliant strategy. Time will tell.
Here's a probably relevant link, but its kind of elderly. https://jolt.law.harvard.edu/digest/intel-and-the-x86-architecture-a-legal-perspective
Not making x86 architecture chips may prove to be a compatitive advantage. This architecturei is long past its sell-by date but it persists because its so widely used. If anything happened to force widespread adoption of an alternative then it may find itself in a serious competitive disadvantage.
Its also an emulated processor -- it emulates the x86 instuction set on a lower level processor. This makes it unsuitable for a lot of high performance computing tasks.
...the west underestimating China.
This is how China crept up and took the world by surprise.
When the world was hit by the last big recession, the west shut up, held back investment and general bickered about who was to blame.
China did the opposite, it trained people and invested heavily. Creating several enterprise zones that became the huge industrial and technological cities we know today.
It's going to happen again.
COVID has hit, and the west will bicker, fight and block, but China will double it's efforts.
I see no reason why they won't succeed.
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